Learning • 6 min read

Chargebacks Explained for UK Merchants

How chargebacks work, what they cost, and the practical steps to reduce them.

What is a chargeback?

A chargeback is a card payment reversal initiated by the cardholder's bank, usually after a dispute. The funds are pulled from your merchant account and returned to the customer, and a chargeback fee is charged on top.

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What they cost

Chargeback fees vary from around £15 to £40 per case. Excessive chargebacks (typically over 1% of monthly transactions) can trigger monitoring programmes and higher pricing.

How to reduce them

Clear billing descriptors, prompt customer service, documented delivery, honest product descriptions and 3D Secure for online. Most chargebacks are avoidable at source.

Key takeaways

●Every chargeback costs you the transaction plus a fixed fee.
●High chargeback ratios trigger scheme monitoring and higher pricing.
●Most chargebacks are prevented by clear descriptors and good service.

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